The cash flow to creditors increases when
A)cash is used to reduce accounts payable.
B)new shares of stock are sold for cash.
C)interest is paid on outstanding debt.
D)an asset is sold for cash.
E)a long-term debt is incurred.

Question

Quizplus · Accepted Answer

Cash flow to creditors increases when interest is paid on outstanding debt. This is because payment of interest represents an outflow of cash from the company to its creditors. A, B, D, and E would all result in an increase in cash flow from operating, financing, or investing activities, but would not specifically affect the cash flow to creditors.

The Cash Flow to Creditors Increases When